INTRODUCTION

The term bank is either derived from old Italian word banca or from a French word banque both
mean a Bench or money exchange table. In olden days, European money lenders or money
changers used to display (show) coins of different countries in big heaps (quantity) on benches or
tables for the purpose of lending or exchanging.

The history of banking began with the first prototype banks which were the merchants of the
world, who gave grain loans to farmers and traders who carried goods between cities. This was
around 2000 BC in Assyria, India and Sumeria.

Finance is the life blood of trade, commerce and industry. Now-a-days, banking sector acts as the
backbone of modern business. Development of any country mainly depends upon the banking
system

A bank is a financial institution which deals with deposits and advances and other related
services. It receives money from those who want to save in the form of deposits and it lends
money to those who need it..

Meaning and Definition of Banking- Banking can be defined as the business activity of

accepting and safeguarding money owned by other individuals and entities and then lending out
this money in order to earn a profit. However, with the passage of time, the activities covered by
the banking business have widened and now various other services are also offered by banks. 
The banking services these days include the issuance of debit and credit cards, providing safe
custody of valuable items, lockers, ATM services, and online transfer of funds across the
country/world.

A bank is a financial institution licensed to receive deposits and make loans. Banks may also
provide financial services such as wealth management, currency exchange, and safe deposit
boxes. There are several different kinds of banks including retail banks, commercial or corporate
banks, and investment banks.

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Oxford Dictionary defines a bank as "an establishment for custody of money, which it pays out
on customer's order."

Characteristics/features of a bank are:

1. Dealing in Money
2. Individual/Firm/Company
3. Acceptance of Deposit
4. Giving Advances
5. Payment and Withdrawal
6. Agency and Utility Services
7. Profit and Service Orientation
8. Ever-increasing
9. Connecting Link
10. Banking Business
11. Name

FEATURES OF A BANKING

1. Dealing in Money

The bank is a financial institution which deals with other people’s money, i.e., the money given
by depositors.

2. Individual/Firm/Company

A bank may be a person, firm, or company. A banking company means a company that is in the
business of banking.

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3. Acceptance of Deposit

A bank accepts money from people in deposits that are usually repayable on demand or after the
expiry of a fixed period. It gives safety to the deposits of its customers. It also acts as a custodian
of funds of its customers.

4. Giving Advances

A bank lends out the money in loans to those who require it for different purposes.

5. Payment and Withdrawal

A bank provides an easy payment and withdrawal facility to its customers in checks and drafts. It
also brings bank money into circulation. This money is in the form of checks, drafts, etc.

6. Agency and Utility Services

A bank provides various banking facilities to its customers. They include general utility services
and agency services.

7. Profit and Service Orientation

A bank is a profit-seeking institution with having service-oriented approach.

8. Ever-increasing

Functions Banking is an evolutionary concept. There is continuous expansion and diversification

as regards the functions, services, and activities of a bank.

9. Connecting Link

A bank acts as a connecting link between borrowers and lenders of money. Banks collect money
from those who have surplus money and give the same to those who require money.

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10. Banking Business

A bank’s main activity should be to do banking business that should not be subsidiary to any
other business.

11. Name Identity

A bank should always add the word “bank” to its name to enable people to know that it is a bank
and deals in money.

TYPES OF BANKS

 Retail banks are probably the banks you’re most familiar with. Your checking and
savings accounts are often kept with a retail bank, which focuses on consumers (or the
general public) as customers. These banks offer loans and may provide credit cards, and
they’re the ones with numerous branch locations in populated areas.1
 Commercial banks focus on business customers. Businesses need checking
accounts just like individuals do. They also need complex services, and the dollar
amounts (and the number of transactions) can be substantial. Commercial banks, which
are also called "business banks" or "corporate banks," manage payments for customers,
provide lines of credit to manage cash flow, and offer foreign exchange services for
companies that do business overseas.
 Investment banks help businesses raise capital in financial markets. If a company wants
to go public or sell debt to investors, it often uses an investment bank. This kind of bank
also may advise corporations on mergers and acquisitions.
 Private banks provide services exclusively to wealthy clients, usually those with at least
$1 million of net worth. They help clients manage their wealth, provide tax advice, and
set up trusts to avoid taxes when leaving money to descendants.
 Central banks manage the monetary system for a government. For example, the Federal
Reserve is the U.S. central bank responsible for supervising banks and setting monetary
policy to control inflation, reduce unemployment, and provide for moderate lending rates.
 Credit unions are similar to banks, but they are not-for-profit organizations owned by
their customers. (Investors own most banks.) Credit unions offer products and services

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 more or less identical to retail banks. The main difference is that credit union members
share some characteristics in common—where they live, their occupation, or an
organization they belong to, for example.
 Online banks operate entirely online; there are no physical branch locations available to
visit with a teller or personal banker. Many brick-and-mortar banks also offer online
services, such as the ability to view accounts and pay bills online, but internet-only
banks are different. Internet banks often offer competitive rates on savings accounts, and
they’re especially likely to offer free checking.
 Mutual banks are similar to credit unions because they are owned by members (or
customers) instead of outside investors. Also like credit unions, they tend to be active in
only a single community.
 Savings and loans are less prevalent than they used to be, but they are still important.
This type of bank helped make homeownership mainstream, using savings deposits from
customers to fund home loans.8 The name savings and loan is derived from that core
activity. 

Functions of bank

Accepting of Deposits

 A very basic yet important function of all the commercial banks is mobilising public
funds, providing safe custody of savings and interest on the savings to depositors. Bank
accepts different types of deposits from the public such as:
Granting of Loans & Advances
 The deposits accepted from the public are utilised by the banks to advance loans to the
businesses and individuals to meet their uncertainties. Bank charges a higher rate of
interest on loans and advances than what it pays on deposits. The difference between the
lending interest rate and interest rate for deposits is bank profit

Agency Functions of Bank

Banks are the agents for their customers, hence it has to perform various agency functions as
mentioned below:

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Transfer of Funds: Transfering of funds from one branch/place to another. 

Periodic Collections: Collecting dividend, salary, pension, and similar periodic collections on
the clients’ behalf. 

Periodic Payments: Making periodic payments of rents, electricity bills, etc on behalf of the
client.

Collection of Cheques: Like collecting money from the bills of exchanges, the bank collects the
money of the cheques through the clearing section of its customers.

Portfolio Management: Banks manage the portfolio of their clients. It undertakes the activity to
purchase and sell the shares and debentures of the clients and debits or credits the account.

Other Agency Functions: Under this bank act as a representative of its clients for other
institutions. It acts as an executor, trustee, administrators, advisers, etc. of the client.

Utility Functions of Bank

 Issuing letters of credit, traveller’scheque, etc.

 Undertaking safe custody of valuables, important documents, and securities by providing

safe deposit vaults or lockers.

 Providing customers with facilities of foreign exchange dealings

 Underwriting of shares and debentures

 Dealing in foreign exchanges

 Social Welfare programmes

 Project reports

 Standing guarantee on behalf of its customers, etc

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Micro finance

What Is Microfinance?
Microfinance, also called microcredit, is a type of banking service provided to unemployed or
low-income individuals or groups who otherwise would have no other access to financial
services.

While institutions participating in the area of microfinance most often provide lending—

microloans can range from as small as $100 to as large as $25,000—many banks offer
additional services such as checking and savings accounts as well as micro-insurance products,
and some even provide financial and business education. The goal of microfinance is to
ultimately give impoverished people an opportunity to become self-sufficient.

MEANING OF MICRO FINANCING

Microfinance is a basis of financial services for entrepreneurs and small businesses deficient in
contact with banking and associated services. The two key systems for the release of financial
services to such customers include ‘relationship-based banking’ for individual entrepreneurs and
small businesses along with ‘group-based models’  where several entrepreneurs come together to
apply for loans and other services as a group. Similar to banking operation traditions,
microfinance entities are supposed to charge their lender’s interests on loans. In most cases the
so-called interest rates are lower than those charged by normal banks, certain rivals of this
concept accuse microfinance entities of creating gain by manipulating the poor people’s money.

Features of micro finance

Various features of microfinance are as described in points given below: – 

 Microfinance serves the need of borrowers belonging to either low-income group or are
unemployed.
 The amount of loan provided under microfinance are generally of smaller amount (i.e.,
micro loans) starting with $100.

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  There is no requirement of any collateral security for availing loan services unlike the
traditional banking institutions who mandatorily needs some kind of collateral for
approving loans. 
 Loans provided under microfinance are usually paid back at higher frequencies. 
 Microfinance provides loan with tenure of short durations.
 Generation of income is purpose of most microfinance loans. 
 Microfinance charges higher rate of interest than levied by banks as

DIFFERENT TYPES OF MICROFINANCE INSTITUTIONS IN INDIA

The microfinance models are developed in order to cope with the financial challenges in
financially backward areas. There are various types of microfinance companies operating in
India.

Joint Liability Group (JLG)

A joint Liability Group can be explained as an informal group consisting of 4-10 individuals
who try to avail loans against a mutual guarantee from banks for the purpose of agricultural
and allied activities. This category generally consists of tenants, farmers and other rural
workers. They work primarily for lending purposes, although they also offer a savings
facility. In this type of institution, every individual of a borrowing group is equally liable for
the credit (Singh, 2010). This kind of institution is simple in nature and requires little or no
financial administration (UBI, no date).

However, one of the serious problems of this structure is personal preferences in lending
credit which resulted in a partial failure of the system. Of late due to various promotional
initiatives taken by banks such as Indian Bank, KarurVysya Bank and Indian Overseas Bank,
the credibility of the Joint Liability Group model has received a boost (The Hindu, 2016). It
still remains a landmark movement in the area of protection of farmers’ land ownership
rights.

Self Help Group (SHG)

Self Help Group is a type of formal or informal group consisting of small entrepreneurs with
similar kind of socioeconomic backgrounds. Such individuals temporarily come together and

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generate a common fund to meet the emergency needs of their business. These groups are
generally non-profit organizations. The group assumes the responsibility for debt recovery.
The advantage of this micro-lending system is that there is no need for collateral. Interest
rates are also generally low and fixed especially for women (Chowdhury, 2013; Business
Standard, 2017). In addition, various tie-ups of banks with SHGs have been implemented in
the hope of better financial inclusion in rural areas (Jayadev and Rao, 2012).

One of the most important ones is the NABARD SHG linkage program where many self-help
groups can borrow credit from banks once they successfully present a track record of regular
repayments of their borrowers. It has been very successful, especially in Andhra Pradesh,
Tamil Nadu, Kerala and Karnataka during the year 2005-06. These states received
approximately 60% of SGH linkage credit (Taruna and Yadav, 2016).

The Grameen Bank Model

The Grameen model was introduced by the Nobel laureate Prof. Muhammad Yunus in
Bangladesh during the 1970s. It has been widely adopted in India in the form of  Regional
Rural Banks (RRB). The goal of this system has been the overall development of the rural
economy which generally consists of financially backward classes. But this model has not
been fully successful in India as rural credit and system of recovery are a real problem. A
huge amount of non-performing assets also led to the failure of these regional banks (Shastri,
2009). Compared to this model Self Help Groups have been more successful as they are more
suited to the population density of India and far more sustainable (Dash, 2013).

Rural Cooperatives

Rural Cooperatives in India were set up during the time of independence by the government.
They used the mechanism to pool the resources of people with relatively small means and
provide financial services. Due to their complex monitoring structure, their success has been
limited. In addition, this system only catered to the credit-worthy individuals of rural areas,
not covering a large part of the country’s financiallybackward section (Rajendran, 2012).

Roles of banks and microfinance in economic development

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Microfinance is the provision of financial services (loans, savings, insurance) to
people on a small scale, such as businesses with low or moderate incomes, but you
can read more meticulous definitions here and here. Loans of micro value are one of
the better known means of helping small business owners in developing countries
move out of poverty. Microfinance Institutions (MFIs) provide loans and savings
services through a variety of lending models, while micro entrepreneurs use these
services. The theory is that if the poor have access to these services, their financial
lives will be more stable, predictable and secure, allowing them to plan and improve
their livelihoods through education, healthcare and empowerment. Microfinance is
also a means for self-empowerment. One of the reasons attributed to interest rates in
microfinance is the high cost of funds –among other sources, microfinanceproviders may
obtain loans from commercial banks, who lend to Microfinance

Introduction

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The Kerala State Financial Enterprises Limited, popularly known as KSFE,  Is a Miscellaneous
Non-Banking Company, Is fully owned by the Government of Kerala.
 Is one of the most profit-making public sector undertaking of the State.
 Was created by the Government of Kerala with the objective of providing an alternative to the
private chit promoters in order to bring in social control over the chit fund business, so as to save
the public from the clutches of unscrupulous fly-by-night chit fund operators.
 Has been registering impressive profits every year, without fail since its inception.

Chitty is the main product of KSFE.

It is a unique financial product, which blends the advantages of both investment and advance.
It is a risk free safe haven for the public as KSFE conducts only chitties fully governed by the
provisions of Central Chit Fund Act 1982.
The instalment per month for chitties range from Rs. 1,000 to Rs. 5,00,000 and the usual
duration of chitties are 30 months, 40 months, 50 months, 60 months and 100 months .Other
Schemes Offered are given below:

chitty

1. Loans & Advances:

Although Chitty is in essence a loan/advance scheme, for subscribers whose chitties are not
getting prized and, at the same time they are in need of money, relief has been provided by two
loan schemes built within the chitty scheme, viz. Chitty Pass Book Loan and Chitty Loan.

KSFE offers other loan/advance schemes, comparable to those given by banks and other
financial institutions, and the same includes:

Gold Loan Scheme, KSFE Personal Loan, Consumer/Vehicle Loan, Special Car Loan, KSFE
Housing Loan, Flexy Trade Loan, Tax Planning Loan Scheme, Fixed Deposit Loan
Scheme ,Sugama (Akshaya) Overdraft Scheme, Vidyadhanam Education Loan Scheme and
KSFE Haritham Loan Scheme.

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2.Deposit schemes:

Fixed Deposit, Short Term Deposit, Sugama Deposit (which is similar to the savings deposit in
Banks), Chitty Security Deposit-in-Trust and Sugama Security Account.

3. Fee Based Activities of KSFE:

   1.Western Union Money Transfer - as sub agent of Paul Merchants Ltd.

   2.Xpress Money Transfer

4. Securities:

From chitty subscribers and customers who avail loans/advances of KSFE, KSFE accepts
various types of securities which include:

Fixed Deposits with KSFE or approved Banks, Bank Guarantee, NRI Deposits, LIC Policies,
National Savings Certificate (NSC), KisanVikasPatra (KVP), Chitty Pass Book of Non-prized
Chitties, Gold Security, Personal surety and Property Security.

Future plans KSFE contemplates:

1. Centralised Chitty Registration.

2. Online Chitty Auction.

3. Chitty payments at the Door step of subscribers.

4. Opening Branches outside Kerala.

5. Spreading weekly chitties to all the KSFE branches.

6. e-remittance facilities for all customers.

7. Foray into the field of M-commerce.

8. Introducing ATM facilities and any time anywhere transaction facilities.

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9. Implementation of core solutions software in the company.

10. Going for CRISIL rating to obtain FAAA.

11. Working as a Nodal Agency for distribution of pension of State/Central Government and
other      PSUs.

12. Undertaking trading of Gold.

What is a Non-Banking Financial Company (NBFC)? A Non-Banking Financial Company

(NBFC) is a company registered under the Companies Act, 2013 of India, engaged in the
business of loans and advances, acquisition of shares, stock, bonds, hire-purchase insurance
business or chit-fund business, but does not include any institution whose principal business is
that of agriculture, industrial activity, purchase or sale of any goods (other than securities) or
providing any services and sale/purchase/construction of immovable property.

ROLE OF A NON-BANKING FINANCIAL COMPANY

A Non-banking institution that is a company whose principal business is the

receiving of deposits, A Non-Banking Financial Company supplement banks

by providing the infrastructure to allocate surplus resources to individuals and

companies with deficits.

ADVANTAGES OF NON-BANKING COMPANIES

1. Provide facilities for loans and credit;

2. Engage in trading of instruments in the money market;
3. Capable of doing wealth management by managing stocks and share
portfolios;
4. Have the power to underwrite stocks and shares along with other
obligations;

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 5. NBFCs can help those whose help banks cannot do;
6. NBFCs are the most significant motivators for moving finances into the
country;
7. NBFCs work swiftly;
8. NBFCs are familiar with the latest technologies, which helps them make
information easily accessible for others anytime, anywhere. 
9. NBFCs know how to make use of digitalization to present multiple choices
to larger audiences at a quicker pace, giving rise to the emergence of
larger NBFC;
10.NBFCs use a combination of partnerships and databases aptly to increase
penetration of financial inclusion. 
11.NBFCs are capable of minimizing financial risks. 
12.NBFCs maintain forged partnerships that too include the government's
ability to use their database, which further helps them in identifying the
worthiness of any customer. This makes their lending productive.

Non-banking financial company( NBFC)

A non-banking financial institution or non-bank financial company is a

financial institution that does not have a full banking license or is not
supervised by a national or international banking regulatory agency. 

OBJECTIVES OF NBFC

1. To carry on the business or businesses of a holding and investment

company, and to buy, underwrite and to invest in and acquire and hold
shares, stocks, debentures, debenture stock, bonds, obligation or securities

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 of companies or partnership firms or body corporate or any other entities
whether in India or elsewhere either singly or jointly with any other
person(s), body corporate or partnership firm or any other entity carrying
out or proposing to carry out any activity whether in India or elsewhere in
any manner including but not limited to the following:
2. To invest and deal with the moneys of the Company not immediately
required in such manner as may from time to time be determined and to
hold or otherwise deal with any investment made.
3. To facilitate and encourage the creation, issue or conversion of debentures,
debenture stock, bonds, obligation, shares, stocks, and securities, and to act
as trustees in connection with any such securities, and to take part in the
conversion of business concerns and undertakings into companies.

4. To give any guarantee in relation to the payment of any debentures,

debenture stock, bonds, obligation or securities.

THE DIFFERENT TYPES OF NBFCS

The NBFCs can be categorised under two broad heads:

1. On the nature of their activity

2. On the basis of deposits

The different types of Non-Banking Financial Corporations or NBFCs are as

follows:

1. On the nature of their activity:

1. Asset Finance Company
2. Loan Company
3. Mortgage Guarantee Company

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 4. Investment Company
5. Core Investment Company
6. Infrastructure Finance Company
7. Micro Finance Company
8. Housing Finance Company
2. On the basis of deposits:
1. Deposit accepting Non-Banking Financial Corporations
2. Non-deposit accepting Non-Banking Financial Corporations

DISADVANTAGES OF NBFC:

An NBFC is not a part of the payment and settlement system and as such an

NBFC cannot issue cheques drawn on itself. Deposit insurance facility is not
available for NBFC depositors unlike in case of banks. All NBFCs cannot accept
deposits; only some can.

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 KSFE

TYPE PUBLIC SECTOR

OWNED BY GOVT. OF KERALA

FOUNDED BY : 6th NOV. 1969

HEAD OFFICE TRISSUR

NO. OF BRANCHES ABOVE 415

CHAIRMAN P.T.JOSE

MANAGING DIRECTOR P.RAJENDRAN

INDUSTRY FINANCE

PAID up CAPITAL 20 CRORES COVERED

BUSINES TURNOVER 15000 CRORES

EMPLOYEES 5100 ABOVE

History of the company

The company started functioning on 6 November 1969, with Thrissur city as its headquarters.
[1] It started with a capital of Rs 2,00,000, and had 45 employees and 10 branches. As of 2021, it
has 600 branches and eleven regional offices
at Thiruvananthapuram, Kollam, Kottayam, Ernakulam, Thrissur, Kozhikode, Kannur, Attingal, 

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Alappuzha, Kattappana and Malappuram.[2] KSFE is a Miscellaneous Non-Banking Financial
Company (MNBFC) and is fully owned by the Government of Kerala. KSFE does not come
under the regulation of Reserve Bank of India since it is not a Non-Banking Financial Company.
KSFE is one of the two chit fund companies owned by the government in the whole of India.The
other company is Mysore Sales International Limited (MSIL) owned by the government
of Karnataka. KSFE's purpose at founding was to provide an alternative to unscrupulous private-
sector chit fund organisers.In 2000, it had 77% of the capital volume of the chit fund business in
Kerala, though just 37.5% of the number of chit funds.

ORGIN OF KSFE
KSFE is a miscellaneous non banking financial institution fully owned by Government of Kerala
and play a significant role in its resource mobilization.
KSFE has been registering impressive profit every year since its inception in 1969 with a turn
over above ₹59000 Crores .100% secured and loyal.
Chitty is the main product of KSFE. It can be treated as a deposit and during its course can serve
as a loan. KSFE provides different types of chitty patterns for all categories of people in the
society. The risk of loss in the chitty is very low compared to other mutual fund deposits.Sugama
Saving Account assure higher rate of interest than Savings Account of Banks.Interest rate of
deposits are high and rate on loans are moderate.
All financial needs are provided under one roof. All types of loans are provided such as Home
loan, Personal loans, Vehicle loan, Gold loan and Chitty loan.

OBJECTIVES OF KSFE
The following are the important objectives

• To start, conduct, promote, manage and carry on the business of chitties in India or
elsewhere.

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 • To promote, undertake, organize, conduct and carry on the business of general
anmiscellaneous insurance of any kind in India or elsewhere
• To start, promote, conduct, operate, carry on and manage the business of dealers agents
and traders under hire purchase system of articles, vehicles, machinery, materials goods
and tools of all capital goods and consumer goods and property of all nature
anddescription for personal, domestic, office, commercial, industrial and community use
and consumption as a business of the company or as agents of government, state or
central, or anybody or organization there under or any other company.

Mission of KSFE

 To function and develop as a reliable and viable organization for providing transparent,
sustainable and beneficial financial services to the public.

 Emancipate them from the clutches of the unscrupulous and ill-motivated operators and
set standards for the conduct of chits.

 To contribute substantially to the ways and means of the State Government.

 To introduce more social security schemes for the upliftment of weaker sections of
society.

 To start more branches in the areas hitherto unrepresented.

 To adopt innovative technology for improving the quality and quantity of our business.

OUR VISION
To become a significant player in the financial services sector by

 Providing a whole range of quality services and products.

 Adopting technology and benchmark standards in customer service and performance.

 Spreading our wings beyond the borders of Kerala, on a global level.

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 Retaining the pre-eminent role in Chitty business.

 Continuing focus on extending resources to the Govt. of Kerala.

 Sustaining commitment to the weaker sections of society, as the neighbourhood

institution for support, trust and security.

 Introducing social responsibility schemes to our customers providing educational

facilities to all students in Kerala.

. FUTURE PLAN OF KSFE

1. Centralized Chitty Registration.
2. Online Chitty Auction.
3. Chitty payments at the Door step of subscribers
4. Opening Branches outside Kerala
5. Spreading weekly chitties to all the KSFE branches
6. e-remittance facilities for all customers
7. Foray into the field of M-commerce.
8. Introducing ATM facilities and any time anywhere transaction facilities.
9. Implementation of core solutions software in the company.
10. Going for CRISIL rating to obtain FAAA.
11. Undertaking trading of Gold.

1. INTRODUCTION

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 The study entitled “Financial Performance Analysis of Kerala State Financial Enterprises
Limited, Thrissur” has been oriented with a view to study the financial position of the company
that helps in making sound decision by analyzing the recent trend. Finance is defined as the
provision of money at the time when it is required. Every enterprise, whether big, medium, or
small, needs finance to carry on its operations and to achieve its targets. In fact, finance is so
indispensable today that it is rightly said to be the lifeblood of an enterprise. Without adequate
finance, no enterprises can possibly accomplish its objectives. Finance refers to the management
of flow of money through an organization. Financial management refers to that part of the
management activity which is concerned with the planning and controlling of firm’s financial
resources. It deals with finding out various sources for raising funds for the firms. Financial
performance analysis means establishing relationship between the items in the balance sheet and
profit and loss account for determining the financial strength and weakness of the firm. It is the
process of scanning of the financial statements to judge profitability, solvency, stability, growth
and prosperity of a firm.

2. OBJECTIVES OF THE STUDY

 To study the financial position and financial performance of the company.
 To judge the solvency of the firm.
 To determine the long term liquidity of the funds.
 To provide valuable suggestions and recommendations for the 32 improvement of
current financial management.

3. RESEARCH METHODOLOGY
Secondary Data The secondary data is collected from annual report of the company of
the last 5 years from 2015- 16 to 2020-21

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 4. SCOPE OF THE STUDY

The study was carried at The Kerala State Financial Enterprises Limited, Thrissur analyze its
financial performance on the past five years.The study aims to analyze the liquidity, profitability,
solvency position of the company. Liquidity ratios like current ratio, quick ratio etc is prepared
to analyze the financial positionof the company. Profitability of the company is found out by
using ratios like return on net profit ratio, return on capital employed ratio etc. The changes can
be observed by comparison of the balance sheet at the beginning and at the end of a period and
these changes can help in forming an opinion about the progress of an enterprise

5. LIMITATIONS OF THE STUDY

 The period considered for the study is the last 5 years’ financial statement only.
So it is not possible to find out the life time performance of the company.
 Figures are rounded off whenever it was necessary.
 The study is made exclusively on the financial aspects of the company.
 Most of the information is collected from the financial statements. So the
limitations of financial statements may affect the study.
 Non-monetary factors like human behavior, their relationship etc are not
considered. 33 Millions of titles a

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 INTRODUCTION

The study entitled “Financial Performance Analysis of Kerala State Financial Enterprises
Limited, Thrissur” has been oriented with a view to study the financial position of the company
that helps in making sound decision by analyzing the recent trend.Analyzing financial
performance is the process of evaluating the common parts of financial statements to obtain a
better understanding of firm’s position and performance. Financial performance analysis enables
the investors and creditors evaluate past and current performance and financial position, and to
predict future performance.Financial statement is used to judge the profitability and financial
soundness of a firm. In this study, an attempt is made to identify the financial strength and
weakness of the firm by properly establishing relationship between the items in the balance sheet
and profit and loss account of KSFE Ltd., Thrissur.

CHITTY
According to the Chit Funds Act of 1982, the Government of India defines a “chit” as “a
transaction whether called chit, chit fund, chitty, kuri or by any other name by or under which a
person enters into an agreement with a specified number of persons that every one of them shall
subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical
instalments over a definite period and that each such subscriber shall, in his turn, as determined
by lot or by auction or by tender or in such other manner as may be specified in the chit
agreement, be entitled to the prize amount.”

Main Features of KSFE Chitties

The total of the periodic subscription is called the chitty Sala. The number of subscribers
(Chittals ) in a chitty will be equal to duration of chitty in months ( in the case of single division
chitty). Auction will be conducted every month to choose one Chittalan(Subscriber of the chitty)
who bids the chitty for the maximum discount and that person will be given Prize Amount. In the
case of Multi Division Chitty the number of persons prized in each month will be equal to
number of divisions. The maximum discount possible is 30% in the case of single division

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chitties. For Multi Division Chitty, maximum discount possible is 30%, 35% or 40% depending
on the duration of the chitty. Multi Division Chitty having more than 100 month duration can be
auctioned up to a discount of 40 % ,while chitties having duration from 60 months to 99 months
can be auctioned up to a discount 35% and chitties with duration less than 60 can be auctioned
up to a discount 30 % . As per the prevailing Chitty Act, if there are more than one subscriber
interested in bidding for maximum discount , the Chittal numbers of the such bidders will be put
to draw to select the bidder for the month. If no subscriber is willing to bid the chitty for
maximum discount, auction will begin from Foreman commission and the subscriber who bids
for maximum discount will win the auction.

What is the benefit of KSFE chitty?

KSFE chitty is a unique financial product with advantages of both investment and advance.
KSFE chitty schemes are risk-free as they are fully governed by the provisions of the Central
Chit Fund Act 1982. … The monthly instalment for KSFE chitties is in the range of ₹1,000 to
₹5,00,000.

DIFFERENT TYPES OF CHITTIES

❖ Long Term chitty

Long Term chitties are investment chitties. Duration of these chitties start from 60 months to
maximum 120 months. Long term chitties are more beneficial to customers who wishes to invest,
as they get high profit as dividend. Preplanned long term chitties help the common customers to
satisfy their needs instead of loans and other schemes. It is a safe way to make large amount of
money for future needs by paying small installment amount

. ❖ Short Term Chitty

KSFE conducts chitties of different durations. Short term chitties ranging from 30 months to 60
months duration are appropriate for subscribers who need the prize money immediately, as there
will not be more customers for bidding the chitty for maximum discount and hence better chance

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for bidding chitty early and the subscribers can auction the chitty for an optimum amount to meet
their emergencies.

❖ Multidivision Chitty

At present most common Multidivision chit in KSFE consists of one lot and three auctions in a
month. The uniqueness of this chitt is that each Non-Prized subscriber will get a chance every
month to get full amount of prize money after deducting foreman commission and the remaining
non-prized subscribers will have the opportunity to participate in 3 auctions. The total discount
excluding foreman commission received from all divisions is distributed equally among all
subscribers in the chit. This chitty attracts more customers, as there is a chance of luck to get the
full prize amount through draw as well as they obtain more turns to participate in auction if they
prefer to.This is a good scheme which the customers can opt instead of loans.

DEPOSIT SCHEMES

❖ Fixed deposit

❖ Short Term Deposit

❖ . Sugama Deposit Scheme

❖ Chitty Security Deposit In Trust

 FIXED DEPOSIT

KSFE lets you make fixed deposits with higher interest rates. Fixed deposit scheme offered by
KSFE has many features similar to that of Term Deposits in banks. But the return offered by
KSFE is comparatively higher than that of banks. Interest rate of deposits from the public is
5.75% per annum, Chitty Prize Money deposit is 6.25% 38 and for fresh deposits from senior
citizens is 6.25%. The effective returns are higher since it is possible to withdraw interest
monthly for deposits above Rs.10,000

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  SHORT TERM DEPOSIT

KSFE is collecting Short Term Deposits for periods ranging from 30 days to 364 days offering
attractive rates of interest for different slabs. Individuals and Institutions can prefer this deposit
for temporary parking of fund. When compared to Nationalised and Scheduled Banks, the rates
of interest are much higher. Minimum amount that can be deposited under this scheme is
Rs.5,000/-Deposits in multiples of Rs.500/- will be accepted. Short Term Deposits will be
accepted as security to future liability in chitty and loan schemes of KSFE. On maturity these
deposits can be renewed for a further period at the then existing rates. Provision is also there for
premature closure of these deposits

 SUGAMA DEPOSIT SCHEME

One of the best deposit schemes offered by KSFE. Sugama Deposit Scheme, in its mode of
action/procedure, is comparable to the Savings Bank deposits in banks, but with a higher interest
rate. Sugama Scheme is the best in the savings account category as it is offering an interest rate
of 5.5%. Sugama acts as a safe and sound transaction scheme for automated chitty installment
repayment, deposit interest withdrawals and day-to-day dealings. The Sugama Security Scheme
is intended for accepting amount outstanding in Sugama Deposits as security towards future
liability in chitty and other schemes. The advantage under this scheme is that the advance will be
secured and the monthly 39 instalments can be adjusted from the account and at the same time
the customers can enjoy interest income on the Sugama Deposit. Sugama Security Account is to
be opened in the name of the subscriber only either by depositing the future liability in cash or by
transfer. No further remittance by any mode is allowed in this account. The deposit amount
should atleast be the future liability. However, in the case of combined security the deposit
amount can be limited to the shortage of security of chitty amount. Rate of interest will be the
same as for Sugama Account. (Now 5.5%). The depositor can withdraw the interest accrued and
credited to the account from time to time. He can withdraw the balance in the account after
termination of the liability or on providing alternate security.

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  CHITTY SECURITY DEPOSIT IN TRUST

This scheme is specifically designed for the chitty subscribers, which allows the prized
subscriber to deposit the prize money in full/part against future liability intending to withdraw
the same on furnishing adequate alternate security or repayable on termination of the chitty,
provided that the amount deposited under this scheme should not exceed the future liability in
the chitty. The period of deposit is minimum 30 days from the opening of chitty and maximum
till the date of termination of chitty.

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 STRENGTH

 Better customer relation

 Good products and services
 Reasonable repayment period
 Better customer satisfaction
 Government owned Company
 Variety of services other than chitties.
 Variety of chitty schemes and several other facilities associated with chitties.
 Works similar to banks
 Branches throughout Kerala
 Skilled employees selected through public examinations
 A relatively younger work force.
 Transparency in operations.
 Updated website gives information about new developments in all branches.
 Tie up with insurance and western union money helps to attract more customers.
 It uses effective advertising campaigns.
 WEAKNESS
 Lack of marketing activities.
 Lack of computer knowledge of workers.
 It has the limitations of NBFC’s.
 Still main business area is on chitties and not yet able to grow in other services.
 Lack of fieldwork in marketing

 OPPORTUNITY
 Improve marketing activities.
 Introduce a disaster recovery system.
 Expansion of small-scale industries in the state.
 Rising middle class.
 Rise in income.

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  Saving thirst increases.
 Ensuring more participation of NRI families in the schemes of KSFE.
 Developing rural areas provide an opportunity to increase customer base.

 THREATS
 Tough Competition.
 Policies of Reserve Bank.

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 FINDINGS

o KSFE is leading player in chit business in Kerala.

o Security of Data center is not sufficient.
o .Flexibility in schemes according to customer needs.
o Some of the services are unique to KSFE.
o Wide acceptability among middle class.
o It improves saving habit of people.
o Agency system has not yet proven its merit and there seems to be clear division
between agents and company staff.
o Lack of concentrated and coordinated marketing efforts
o Lack of specific transfer norms and the undue influence of trade unions in these
matters.
o Total absence of modern performance appraisal mechanisms.
o No modern facilities for remittances like e-payment or ECS
o Absence of effective customer feedback surveys and marketing researc

SUGESSTIONS

• Need more branches in rural areas.

• Give much concentration on recovery procedures
• Effective customer feedback mechanisms should be introduced.
• Employee motivation needed.
• More management techniques need to be adopted .
• Introduce a disaster recovery site for data center. That will ensure safety of data
• Try to introduce new schemes as per customer requirements

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 • Salary certificates offered by the employees of reputed private firms and the guarantee
provided by the businessmen with PAN card can be accepted at par with State employees
salary certificates.
• Chitty loan scheme should be made more subscriber-friendly by reducing the rate of
interest. In the light ofthe social commitment of the Company, Chit loan scheme at
concession rates of interest should be considered for lowincome subscribers and women
and for self-employment programmes.
• Human Resource Development programmes for the staff will enhance efficiency and
enable speedy and better service. It will also help in maintaining good customer relations.
• Along with its rural branch expansion programme, KSFE must extend its services and
operations to other states in India and plan for starting even overseas branches.
• KSFE needs to be protected against high politicisation so that the Company can
implement the decisions without delay. Incorporation of professional and financial
experts into the Board of Directors of KSFE, is also desirable
• . The Company should increase its paid up capital. The government itself can contribute
more capital to the Company.
• . KSFE should arrange public awareness campaigns and customer awareness
programmes. Information Bureaus can be opened in important regions and places.
Customer meets could be arranged occasionally. Complaint Book or Suggestion Box
should be provided at every branch
• . A Research and Development wing may be opened at the head-office for the
evaluation, planning and promotion of business. Every scheme should be evaluated
periodically and corrections, if any, introduced immediately

CONCLUSION

The study was conducted to analyze the financial performance of The Kerala State Financial
Enterprises Limited. The present study attempted to discuss the financial performance of the
company. . The analysis of the data has provided major conclusion that the company is
witnessing a lot of risks in the form of competition, less profitability etc. It would be better for

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the company to look forward on modernization and diversification programmers. The company
may concentrate more on chitty based business, accepting deposits, liberalize loans and
advances. Performance of the business

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